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IZA Discussion Paper No. 3881
December 2008
Worker Self-Selection and the Profits from Cooperation

published in: Journal of the European Economic Association, 2009, 7(2-3), 573 - 582

We investigate a competitive labor market with team production. Workers differ in their motivation to exert team effort and types are private information. We show that there can exist a separating equilibrium in which workers self-select into different firms and firms employing cooperative workers make strictly positive profits. Profit differences across firms persist because cooperation strictly increases output and worker separation requires firms employing cooperative workers to pay out weakly lower wages.

Communications
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer@liser.lu
+352 585-855-501
Network Coordination
Christina Gathmann
christina.gathmann@liser.lu

The IZA@LISER Network is a global community of scholars dedicated to excellence in labor economics and related fields, now coordinated at the Luxembourg Institute of Socio-Economic Research (LISER) following its transition from Bonn.

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